Masters of Law Firm Management event on the topic: “Legal Process Outsourcing - the real story”. The event will include a keynote address from founder and former CEO of the world’s largest LPO, Integreon, who is now Founder and Chairman of Elevate Services, which he describes as “LPO 2.0”. The Law Council Review spoke with Mr. Brown about the current state of the LPO industry, the concerns surrounding the industry and its future in the legal profession.


Where did you get the idea to start a business like Integreon?


In the 90s I worked at a fi nancial document company that produced IPO prospectuses and they had a business practice where they moved the work from their offi ces around the world (“spokes”) to a centralised, low cost location (“hub”), instead of staffi ng all the offi ces, or moving the people around to whichever offi ce was busiest (which was common practice amongst our peers). That was an insight for me: you can move knowledge work to lower cost locations. Then in ’98 I built my fi rst business: a dotcom virtual dataroom company for Mergers and Acquisitions (M&A), where I saw lawyers and bankers unbundle work, use the Internet to work together remotely, and then reintegrate their work product. That was my second insight: professionals could unbundle complex knowledge work.


My original Integreon business plan in 2001 was about unbundling and moving non-value added knowledge work for professionals to lower cost locations off shore and onshore. I thought that management consultants and investment bankers might be early adopters of this new way of doing business, while I didn’t think that lawyers would, so I decided Integreon would focus on performing knowledge process outsourcing (“KPO”, similar to LPO) for management consultants and investment bankers. There was another company called Offi ce Tiger which started about the same time, doing the same thing, and which was also very successful, so we had competitors co-create the market.


I almost completely missed LPO, which is the part of the Integreon story people don’t really know and are often surprised to learn. When Pangea3 launched, made up of ex-Offi ce Tiger employees who decided to build an LPO business and move legal work to India, I met with their founders. I walked out of the meeting thinking the concept wouldn’t get off the ground and that they would struggle to get lawyers to trust an outsourcing provider working on their legal matters 10,000 miles away. I didn’t think anything of it. Boy was I wrong! You’d have thought, given the similar knowledge work I was doing for consultants and banks, that I would have been more open than most to outsourcing knowledge work for lawyers, but I actually thought it was never going to work.


About six months later two things happened (this was in about 2006): some of my investment banking clients said ‘you’re doing all this other research work for us, why can’t you help our legal department? It’s diff erent, but it’s the same—it’s still knowledge work’; the second thing that happened was that I fought a legal battle with a medical outsourcing company that changed their name to ‘Integreo’. I ended up fi ghting them in a trademark litigation, which I won, but spent something near $500,000 on the case. I was very happy with winning but not so happy with spending so much money. Of that $500,000, half of it was spent on people reading my emails—essentially during discovery. And that’s when I had that light bulb moment: ‘I’m missing this big opportunity because I have people who can do this work for a lot less than paying $250 an hour to a junior US lawyer.’


After this I felt I really had to catch up to where the industry already was and so I slowly, but surely, put together a strategy for how Integreon would build an LPO business that was focused on providing an end-to-end solution for litigation. Other providers were doing things like contracts and IP but it was early Integreon’s focus on litigation that helped it grow so quickly.


What’s your take on the current state of the LPO industry?


There are a couple of notable trends. The fi rst is that a lot of venture and private equity capital went into the industry in 2006 and now those investors are looking to monetse their returns. That causes LPOs to operate diff erently to how they did in the fi rst fi ve years of the industry’s existence. They’re now less inclined to invest in the long-term because their investors are focusing on near-term returns and liquidity. This creates a challenge to their clients and employees—I believe it is a mistake to focus on near-term returns and liquidity in serving the legal market, where relationships between a company, its law fi rms and its LPOs are not just a series of mutually exclusive transactions; but rather more an ecosystem where all parties are looking for mutual gain over the long term. There has been a signifi cant shift in strategy and direction at many of the leading fi rst generation LPOs because the growth of those LPOs was fueled by outside capital. Those investors helped the LPO entrepreneurs build capabilities and educate the marketplace and now they’re looking to monetise their investments.


The second trend relates to the LPO providers being somewhat stuck in their startup paradigm of ‘we need to look like our clients so they trust us, but do the work at lower cost’. They’ve been hiring lawyers in low cost off shore and onshore locations, but doing the work in a similar way to how their clients’ lawyers have done so in the past – or how their clients have told them to do it. In my view, LPO 1.0 has been about labour arbitrage rather than process reengineering and systemitisation of the work. I think LPO 2.0 will be the evolution of LPO to true consulting, process reengineering, i.e. disaggregation of steps in the legal system and its frictionless reintegration, and technology. It’s going to deliver defensible, repeatable, sustainable, measurable and improvable outcomes. I believe many current LPOs are struggling with this as they grow, which is another driver for the investors to cash out.


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